Treasury Announces Targeted Investment Program of "Citi-Style" Rescues

The treasury has announced a fresh new wave of insanity called the Targeted Investment Program (TIP) in which the Treasury will mull Citi-style rescues on case-by-case basis.

The Treasury Department opened the door Friday to using a Citigroup-style rescue package to help other troubled financial institutions.

The financial lifeline thrown to Citigroup Inc. in late November involved backing billions in risky assets and providing the banking giant with a fresh capital infusion.

Treasury said participation by other companies in such a program would be weighed on a case-by-case basis. Treasury said it would consider, among other things, whether the "destabilization" of a financial institution could threaten the viability of creditors and others. It also would weigh the extent to which the institution faced a loss of confidence because of the troubled assets it held.

The information was contained in guidelines for the initiative, dubbed the Targeted Investment Program, unveiled on Friday.

"This program will be applied with extreme discretion in order to improve market confidence in the systemically significant institution and in financial markets broadly," the department said. "It is not anticipated that the program will be made widely available."

Expect No Discretion

• The treasury has thrown thrown $350 billion around with no accounting.
• The Treasury and Fed are facing class action suits under the freedom of information act for refusing to say how the money already allocated has been spent. See Bloomberg Sues Fed to Force Disclosure of Collateral. Also see FOX Business Network Sues the Treasury Department
• The Treasury has committed billions more in funding than congress has allocated. See Paulson's $6 Billion Foot In The Door Play.
• The Treasury Makes Subprime Auto Loans.

When the treasury says it will use "extreme discretion in order to improve market confidence" it really means there will absolutely no discretion; that it will do what it damn well wants, anytime it wants, whether it has the money to do so or not.

Guidelines And Justification

The Treasury offers these Guidelines and Justification for TIP.

Guidelines for Targeted Investment Program

The United States Department of the Treasury will determine eligibility of participants and allocation of resources under the Emergency Economic Stabilization Act (EESA) pursuant to the Targeted Investment Program. Financial Institutions (as defined in EESA) will be considered for participation in the Targeted Investment Program on a case-by-case basis. There is no deadline for participation in this program.

Justification

The objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security. In an environment of high volatility and severe financial market strains, the loss of confidence in a financial institution could result in significant market disruptions that threaten the financial strength of similarly situated financial institutions and thus impair broader financial markets and pose a threat to the overall economy. The resulting financial strains could threaten the viability of otherwise financially sound businesses, institutions, and municipalities, resulting in adverse spillovers on employment, output, and incomes. ....

For more on what "Citi-Style" might mean please see Citigroup Bailout Terms of Agreement.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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